January home sales give rise to correction concerns

TORONTO -- Surging sales in the piping hot real estate markets of Toronto and Vancouver last month prompted one of Canada's big banks to express concerns Tuesday that the cities may be at risk of a home price correction.

See Full Article

The Canadian Real Estate Association reported Tuesday that sales of existing homes rose by eight per cent in January compared to a year ago, while the national average home price soared 17 per cent.

But it was the sales figures for Vancouver and Toronto that drew considerable notice from economists.

The average sale price in greater Vancouver rose 32.3 per cent year-over-year to nearly $1.1 million, while in greater Toronto it climbed 14.2 per cent to $631,092.

The Multiple Listing Service benchmark price -- a figure that CREA says is more representative of the market -- rose to $775,300 in great Vancouver, an increase of roughly 21 per cent compared to January 2015. In greater Toronto, the benchmark price climbed roughly 11 per cent year-over-year to $578,400.

TD economist Diana Petramala said some of the strength in the Toronto and Vancouver markets may have been bolstered by buyers looking to get into the market before new mortgage down payment rules took effect Monday.

New federal regulations require larger down payments on homes that cost between $500,000 and $1 million.

"While we continue to believe that things just can't any hotter, markets in B.C. and Ontario continue to prove us wrong," Petramala said in a note to clients.

Petramala said although foreign investment and immigration are likely to provide support to the Toronto and Vancouver markets in the months ahead, she raised concerns about whether sky-high home prices in those regions are sustainable over the long term.

"Every month of double-digit home price growth raises the risk of a deeper home price correction down the road," Petramala said.

A correction is defined as a drop in value of at least 10 per cent.

The price gains in Vancouver and Toronto fuelled a rise in Canada's national average home price in January to $470,297, CREA said.

When excluding Ontario and British Columbia, however, the average sale price actually edged lower by 0.3 per cent from a year ago to $286,911.

Regional differences stemming from the impact of the oil price shock are likely to continue throughout this year, said BMO economist Robert Kavcic.

"Those markets exposed to oil prices are correcting," he said in a note.

"The uber-tight big-two cities are benefiting from lower interest rates than we otherwise would have seen had oil prices not fallen, while everyone else is scattered in between."

On a month-to-month, seasonally adjusted basis, CREA says national home sales rose 0.5 per cent in January, compared to December of last year.

Meanwhile, the number of new listings on MLS declined by 4.9 per cent in January compared to December.

"Tighter mortgage regulations that take effect in February may shrink the pool of prospective homebuyers who qualify for mortgage financing and cause national sales activity to ease in the months ahead," CREA chief economist Gregory Klump said in a statement.


Latest Economic News

  • Asian stocks mixed due to Wall Street gloom

    Economic CTV News
    TOKYO -- Asian shares were mixed Friday as a weaker yen sent Japan's benchmark higher, despite persisting gloom from Wall Street's recent declines. KEEPING SCORE: Japan's benchmark Nikkei 225 gained 0.6 per cent to 17,446.41 and the Shanghai Composite index inched up less than 0.1 per cent to 3,112.91. Source
  • Amazon using Prime service to court food shoppers

    Economic CTV News
    NEW YORK -- Amazon wants you to order your turkey, stuffing and cranberry sauce online this Thanksgiving - its latest effort to make its Prime subscription service a central part of food shopping, much the way it's done for other consumer goods. Source
  • Police arrest, evict oil pipeline protesters in North Dakota

    Economic CTV News
    CANNON BALL, N.D. - A months-long protest over the Dakota Access oil pipeline reached its most chaotic pitch yet when hundreds of law enforcement officers moved in to force activists off private property. Thursday's nearly six-hour operation dramatically escalated the dispute over Native American rights and the project's environmental impact, with officers in riot gear firing bean bags and pepper spray. Source
  • Feds defend Pacific NorthWest LNG decision as court challenges filed

    Economic CTV News
    Catherine McKenna, second left, Minister of Environment and Climate Change, speaks while flanked by Jim Carr, from left to right, Minister of Natural Resources, British Columbia Premier Christy Clark and Dominic LeBlanc, Minister of Fisheries, Oceans and the Canadian Coast Guard, after the federal government announced approval of the Pacific NorthWest LNG project, at the Sea Island Coast Guard Base, in Richmond, B.C. Source
  • United Way loses top ranking as America's largest charity

    Economic CTV News
    NEW YORK -- United Way, ranked as America's largest charity for all but one of the past 25 years, has been emphatically knocked from that spot by Fidelity Charitable, the leader of a rapidly growing philanthropic sector that is transforming the way many Americans give. Source
  • Meet George Jetson: Uber sees flying commuters in 10 years

    Economic CBC News
    Flying commuters like George Jetson could be whizzing to work through the sky less than 10 years from now, according to ride-services provider Uber, which believes the future of transportation is literally looking up. Uber Technologies Inc released a white paper on Thursday envisioning a future in which commuters hop onto a small aircraft, take off vertically and within minutes arrive at their destinations. Source
  • Husky Energy says response to Saskatchewan oil spill cost $90M

    Economic CTV News
    CALGARY -- Husky Energy says it has spent about $90 million responding to a pipeline spill in July that sent some 225,000 litres of heavy oil and diluent into the North Saskatchewan River. The Calgary-based company said Thursday that it believes the amount spent up to Sept. Source
  • Oilsands players hammer down costs, but is it enough?

    Economic CBC News
    The cost of producing a barrel of oilsands oil has come down substantially, but red ink continued to rule the day in the Alberta energy sector as third-quarter earnings rolled out this week. Suncor — one of three major oilsands producers that reported earnings in the past 24 hours — said that its operating costs decreased to $22.15 a barrel, an 18 per cent reduction over last year. Source
  • Police, soldiers move in to force Dakota Access protesters off private land

    Economic CBC News
    Armed law enforcement officers and soldiers, including some in riot gear, moved in on Thursday to remove Dakota Access pipeline protesters camped on private land in the path of the oil pipeline in North Dakota. Authorities with trucks, police cars, military Humvees and buses began the operation just before midday, with sirens blaring and officials telling protesters over a loudspeaker to move out. Source
  • National Bank cutting 600 jobs as part of digital shift

    Economic CBC News
    National Bank announced Thursday it will eliminate about 600 jobs as it aims to speed up its transition to the growing digital economy. At the same time, the Montreal-based bank said it will hire about 500 people, especially in sales and service and information technology functions. Source